Taking strong strides towards the future

Taking strong strides towards the future Annual Report 2012

About this Report This Annual Report is about Grupo Financiero Banorte s challenges, initiatives, results and commitments in the financial, social and environmental areas that its activities encompass. This is our third integrated Report and the fourth prepared under version 3.1 of the Global Reporting Initiative s (GRI) methodology, the most recent one having been published in 2011. In this Report, the indicators Grupo Financiero Banorte determined as material are stated considering its operation as a financial institution. A process of global analysis in which the Group s CEO and Senior Management participated was carried out to define content and relevance, and included 10 interviews aimed at defining focus areas and aspects most relevant to GFNorte in 2012. In addition to these interviews, a consulting firm helped us define key financial sector indicators. The figures and initiatives contained in this Report represent the work performed and achievements obtained from the merger of Grupo Financiero Banorte and Ixe Grupo Financiero, which as of 2012 constitutes GFNorte s base for a comparative measurement of the increasing impact of its initiatives. The measurement methods used to obtain the results are based on indicators developed by GFNorte, as well as protocols framed in the methodology of reporting organisms like GRI and CDP. This Report will not include the environmental results of the Group, only of Banorte and Ixe its subsidiaries which combined represent more than 80% of the Groups s profits. However, a breakdown of GFNorte s carbon footprint generated mainly by energy and fuel consumption will be included in the report issued for the CDP on the dates set by it. 2

Index In memoriam of Roberto González Barrera 1. Our Message 5 Message from the Chairman of the Board of Directors 6 Message from the CEO of Grupo Financiero Banorte 8 Relevant Figures and Material Events 12 2. Who We Are 15 Organizational Profile 16 Corporate Governance Structure 18 Dialogue with Stakeholders 22 Awards and Recognitions 25 3. What We Do 27 Our Corporate Responsibility Strategy 28 Economic Performance 29 Social Performance 45 Environmental Performance 52 4. Indicators and Verifications 57

Notas a los Estados Financieros Grupo In memoriam Financiero Banorte of Roberto González Barrera Eight months after Roberto González Barrera s passing, Grupo Financiero Banorte continues to follow the life example he left us by working hard to contribute his vision and commitment for a stronger country. Roberto González Barrera was born in 1930 in the municipality of Cerralvo, Nuevo León, Mexico. His entire life, from early childhood was devoted to business activities, as his formal schooling ended after the third grade. His first business activity consisted of renting shoe shine boxes to his cousins which enabled him to generate some initial savings that would later become the base for his burgeoning business career. In 1949, guided by his enterprising spirit, Roberto González founded Grupo Maseca (GRUMA) in partnership with his father with an initial production of 15 tons a month. Today GRUMA is a world leader in corn flour production with a presence in 113 countries. Likewise, and to the surprise of many, Roberto González held a very special position in the local world of finance, becoming the most successful Mexican banker after the banks were reprivatized in 1992. As majority shareholder of Mexico s largest Mexican-controlled bank, he spent more than two decades growing and consolidating Grupo Financiero Banorte. 20 years after the acquisition of Mexico s second smallest bank, and as a result of his untiring efforts, he managed to position Grupo Financiero Banorte as Mexico s third largest bank. This achievement was perhaps one of the biggest challenges of his life, as he himself once said: I knew nothing about banking. The only thing I knew about banks when I was invited to invest was that I owed them money. Today he has left us with an enormous challenge as a Group, being Mexico s largest Mexican-controlled, a challenge we will undoubtedly rise to with pride as we follow his example of honesty, perseverance and discipline. Roberto González will always be an example and source of inspiration for all of us who knew him. He was a great teacher. His humility, cheer, respect and strength as well as his attachment to his roots were his daily compass. He was a committed and responsible man, a person who saw no limits, for whom family was the pillar that sustained each of his achievements, the inspiration that drove him to work hard to achieve his goals, and he took great pride in being Mexican. Today his many facets have become engraved memories: a tireless businessman and visionary, a philanthropist who was always concerned about the needs of others, but above all a great human being who had a grateful attitude towards life and was concerned about those around him, from his family to each and every one of his employees. His passing has left a huge gap in the lives of thousands of people, but also a wonderful model for life, an inspiration and call to continue to work for the benefit of Mexicans. Roberto González Barrera, thank you for making us feel part of your family, your great Mexican family. Grupo Financiero Banorte 4

1 Our Message

Notas a los Estados Financieros Message from the Chairman Grupo Financiero Banorte of the Board of Directors This second year as Chairman of the Board of Directors of Grupo Financiero Banorte has been very rewarding but has also posed significant challenges. The biggest was undoubtedly the unfortunate passing of Roberto González Barrera, a dear friend and partner in many battles. Like Roberto, I experienced the re-privatization of the banks while at the Ministry of Finance and Public Credit. He demonstrated a great deal of courage by acquiring a small regional bank in an unknown sector, but also great tenacity by converting it into one of the country s largest institutions despite a very adverse environment for banks at the time. All of us who knew Roberto, especially Banorte s employees, will miss him very much. Now we must work to consolidate his legacy and seek out new sources of growth in order to continue building Mexico s leading bank. Regarding this, 2012 saw the emergence of significant strategic opportunities for the Financial Group, the most important one being the acquisition of Afore Bancomer, which made Afore XXI Banorte Mexico s largest Retirement Fund Management Company with almost 12 million worker accounts, assets in the region of Ps. 550 billion, and a market share of almost 30%. For Banorte this is a promising business given the opportunities that Mexico s demography and labor market growth represent. Over the next ten years, the assets under management of the Afores are expected to grow by around 15% on average per annum reaching more than 20% of the Gross Domestic Product. This means Afore XXI Banorte will continue to grow, safeguarding the savings of an increasing number of Mexicans and driving profitable investment projects in the country. The very fact this acquisition was possible is testimony to the positive economic environment in which banks in Mexico have been operating, despite an increasingly complicated international environment, especially in Europe. As I said in last year s Annual Report, some EU countries such as Greece, Spain and Italy are facing a tenuous situation, which became aggravated in 2012. However, and despite all of the problems that arose during the year, the worst-case scenario which saw Greece leaving the Euro never materialized. That would definitely have had very serious implications for international financial markets and prolonging the 2008 global financial crisis, from which we have not yet fully recovered, even more. Within our region, the US had a year of weak growth but not enough to impact the solid performance of the Mexican economy, which grew by around 4%. The growing competitiveness of Mexican labor and specialization in sectors such as automobiles, technology and aerospace, among others, are undoubtedly driving Mexico s growth. This was reflected in financial markets, which had one of their best years in a very long time. This growth is also thanks to a notable improvement in the political environment following the election of President Peña Nieto and the importance that he, along with other politicians, are placing on the structural reform agenda that I repeatedly pointed out when I was governor of the Bank of Mexico, and which is so essential to achieving a higher rate of growth. For its part Grupo Financiero Banorte had a year of historically good results that Alejandro Valenzuela will talk about in more detail in the CEO s business report. Growth in the loan portfolio was a noteworthy 15% driven by payroll, credit card, SME, government and mortgage loans. Our total deposits also grew 15%, which kept the 6

Informe Anual 2010 Annual Report 2012 cost of funding stable. On the other hand there was a slight increase of 2.1% in past due loans, mainly due to the clean-up of some Fincasa Hipotecaria (housing) assets. As a result, Banorte consolidated its position as one of Mexico s three largest financial institutions. We are already the second largest bank in terms of government and mortgage loans, the third largest in terms of retail and consumer loans, and the fourth largest in terms of credit cards, having overtaken HSBC in market share in this segment during 2012. This enabled the Group to post a net profit of Ps. 10.9 billion for 2012, 28% more than in 2011, driven by higher growth in revenues and slower growth in expenses. The Financial Group s efficiency ratio improved due to positive operating leverage obtained during the year, thus enabling us to meet one of our main short-term strategic objectives, consisting of closing the gap with banks in the financial system that boast better efficiency indicators than ours. With respect to Corporate Governance, we continue to build a more independent and participative Board. During the year we held a strategic session with our Board members in which priorities for the next 5 years were defined. The results of this unprecedented effort on the part of the institution are materializing; for example, the recent alliance signed with IBM to make us a customer-centric institution. Another new initiative was the First Plenary Session of our Regional Boards in which 115 Board Members and 120 Customers participated along with special guests and speakers. The session was attended by the then President Elect Enrique Peña Nieto at the inaugural dinner and the then President of Mexico Felipe Calderón Hinojosa during the closing ceremony. Distinguished speakers included the Former Chairman of the US Federal Reserve, Alan Greenspan, former Spanish Prime Minister Felipe González and Presidents Ricardo Lagos and Ernesto Zedillo, as well as the former Managing Director of the International Monetary Fund Michel Camdessus, among other special guests. The session addressed topics of international, regional and national interest providing our Board members with unique perspectives and dialogues on the most relevant current issues. The Plenary Session brought the Regional Boards first year to a successful close. We now have 174 Board Members sitting on our 5 Regional Boards throughout Mexico, and in 2013 we plan to create a new Regional Board representing the States of Aguascalientes, Guanajuato, San Luis Potosí, Querétaro and Zacatecas with 45 new Board Members, which will take the total number to 219. Finally, as in previous years, I would like to take this opportunity to reiterate my gratitude to our shareholders, board members, employees and customers for their ongoing commitment to Banorte. 2012 was undoubtedly a good year for the institution, largely due to the teamwork of all of the Financial Group s stakeholders. I would ask you to keep up this work in 2013 so we can achieve the ambitious goals we have set for ourselves. Guillermo Ortiz Chairman of the Board of Directors of Grupo Financiero Banorte 7

Notas a los Estados Financieros Message from the CEO Grupo Financiero Banorte of Grupo Financiero Banorte For Grupo Financiero Banorte, 2012 will be remembered as the year in which Roberto González Barrera, our boss, majority shareholder, Chairman Emeritus and founder of the modern-day Banorte, passed away. Roberto left this institution with a great legacy by transforming it from a small regional bank with a market share of less than 3% to one of Mexico s 3 leading financial institutions with 14% of the loan portfolio and deposits, and the only bank in Mexico controlled by Mexicans. Roberto always held a deep love for Mexico, as reflected in all of the decisions he made at Banorte s helm. Not only did he spearhead efforts for growth, but he also created one of the most modern corporate governance structures in the country to ensure the smooth running of the bank. In this regard, the appointment of Guillermo Ortiz as Chairman of the Board was another step further in the institutionalization of the Financial Group, and an indication of Roberto s great vision in paving the way for his succession in the Board of Directors of Grupo Financiero Banorte. Few businessmen have been able to implement such institutional handovers, but Roberto understood that it was a necessary decision to ensure the institution s continuity, given that it concerned one of the most public companies in Mexico with a very large minority shareholder base. Our beloved Roberto will be sorely missed, and we will seek to continue his legacy by taking Banorte to new levels of excellence with a long-term institutional vision for the future. 2012 was also marked by several important events for the development of the institution. However, the most relevant one was undoubtedly our consolidation as a leading institution in the retirement savings segment through the acquisition of Afore Bancomer. The merger of Afore Bancomer with Afore XXI Banorte increased our customer base to around 12 million while assets under management rose to around Ps. 550 billion, or almost 30% of all of the funds managed by Mexico s retirement savings system. The acquisition is, without doubt, one of Banorte s most important transformational transactions in recent years. During the year we opened the Contact Center, named for Roberto González Barrera, designed to integrate the activities that take place in 14 Contact Centers across the country with a view to achieving important synergies. With an initial investment of more than Ps. 620 million and more than 40 thousand square meters of construction. The Contact Center will attend Banorte and Ixe customers through 1,700 executives, mostly college students, using a cutting-edge technology platform and security systems. In line with the institution s vision for protecting the environment, the building is environmentally friendly, as it operates with maximum energy efficiency and savings in water consumption. Some major organizational changes also took place in 2012. Héctor Ávila was appointed Managing Director of Legal, Gabriel Casillas became Managing Director of Economic Research, Marcos Ramírez became Managing Director of Casa de Bolsa Banorte Ixe (following the merger of Casa de Bolsa Banorte with Ixe Casa de Bolsa at the beginning of the year), Luis Pietrini became Managing Director of Wealth and Private Banking, René Pimentel became Managing Director of Asset Management and Business Development, Alejandro Aguilar became Managing Director of Mutual Funds, Samuel Munafo became Managing Director of Inter National Bank, Alejandro Vázquez Managing Director of Institutional Relations and Communication and Javier Salgado Deputy Managing Director of Planning and Finance, among others. As of January 2013, David Aarón Margolín was appointed 8

Informe Anual 2010 Annual Report 2012 Managing Director of Risk Management. These changes were designed to procure a more robust Senior Management team in accordance with the present and future challenges we face as leaders in the Mexican financial industry. We also consolidated our regional organization by optimizing the structure of Ixe and Banorte and this will be gradually reflected in more efficient decisions and better levels of customer service. With respect to banking infrastructure, Banorte-Ixe made significant progress with the development of all of its service channels. We serve more than 11.3 million bank customers through 1,316 branches, 174 of which correspond to Ixe, 6,707 ATMs and 115,213 POS terminals. During the year the number of branches grew by 2%, ATMs by 5% and POS terminals by 27%. INB has 20 branches in the state of Texas. The network of third party correspondents increased to 3,080 points of contact, mainly through Telecomm-Telégrafos and 7-Eleven stores. Our clients can open basic accounts, make deposits, pay credit cards and undertake other basic transactions through this network of contact points. We also opened 8 new SME centers in the country bringing the total number of service centers for this customer segment to 10. The number of clients making Internet transactions grew to more than one million three hundred thousand, 27% more than in 2011, and the number of mobile bank transactions totaled more than ten million, growing 112% in 2012. With a view to continue taking banking services to more and more Mexicans, Banorte-Ixe launched MiFon, a tool that enables transactions to take place between cellular phones by opening a low volume account with minimum requirements. We also launched Pago Móvil, a Banorte Móvil application that enables our customers to use their cellular phones to make payments at shops and internet stores using a secure virtual card without the need for a physical card. With respect to financial results, Grupo Financiero Banorte recorded historical highs in 2012. Profit for the year amounted to Ps. 10.89 billion, 28% more than in 2011. The YoY increase was due mainly to a 16% increase in total revenues vs. 13% in operating expense, which generated positive operating leverage, as well as contributions from Ixe Banco of Ps. 719 million (+256% vs. 2011), Banorte-Ixe Tarjetas of Ps. 662 million and Afore XXI Banorte of Ps. 532 million (+155% vs. 2011). In 2012, Return on Equity (ROE) was 14.3%, 25 basis points above 2011. Excluding goodwill from the merger with Ixe, ROE was 18.7%, 1.80 percentage points higher than in 2011. Banking Sector ROE, which includes Banco Mercantil del Norte, Ixe Banco, Banorte-Ixe Tarjetas and INB was 16.9%, 2.70 percentage points above 2011, while the ROE of Ixe Banco was 14.6%, 10 percentage points above 2011. The Return on Assets (ROA) of Grupo Financiero Banorte amounted to 1.3%, 12 basis points more than in 2011. When analyzing the different categories of results, interest income increased by 16% in 2012 YoY to Ps. 32.81 billion driven by loan volumes and a better deposit and loan volume mix. Core deposits grew 10% for the year driven by an 11% rise in demand deposits and 7% in retail time deposits. Non Interest Income grew 16% YoY totaling Ps. 14.51 billion driven by the inclusion of Ixe s operations, and more revenue from Trading, Fees and Recoveries. Service fees rose 17% driven by better business dynamics reflected mainly in higher electronic banking fees and consumer loan and credit card fees; real estate recoveries rose 17% resulting from the favorable performance of investment projects, trading +49% due to the adequate management of securities and foreign exchange positions, and other operating income (expense) decreased by 18% as a result of a reduction in other income owing to less proprietary and acquired loan portfolio recoveries as well as more expenses related to write-offs and contingencies. The 2012 Efficiency Ratio was 54%, 1.6 percentage points below the previous year. Non interest expense increased by 13% vs. 2011, mainly because of the inclusion of Ixe s expenses and expenses related to the merger, as well as growth across business areas. In 2012 Provisions totaled Ps. 6.172 billion, 13% above 2011 due to greater commercial, corporate and payroll loan loss reserve requirements. At the close of December 2012, performing loans increased 15% YoY to Ps. 401.43 billion. As in 2011, all segments of the loan portfolio again registered positive growth rates in 2012. Government loans rose 24% YoY to Ps. 88.29 billion. Corporate loans rose 11% in 2012 to Ps. 63.57 billion while commercial loans totaled Ps. 130.93 billion, a YoY increase of 6% driven by 26% growth in the SME segment, which accounts for 22.7% of the commercial loan portfolio and 7.4% of the total loan portfolio. Consumer loans, including mortgage loans based on internal business definitions, increased by 20% vs. 2011, driven by all segments. Payroll loans, which were again the main driver of the loan portfolio for the year, grew by 35% to Ps. 18.18 billion at the close of December 2012 driven by the cross selling strategy aimed at our more than 3.9 million payroll account holders. Mortgage loans totaled Ps. 72.37 billion for the year, 9

Notas a los Estados Financieros Grupo Financiero Banorte 13% more than in 2011, continuing to consolidate Banorte-Ixe as one of the main mortgage banks for Mexicans. Credit card loans rose 53% due to the inclusion of Ixe s portfolio in the new SOFOM Banorte-Ixe Tarjetas, along with successful loan portfolio management strategies. The car loan portfolio increased by 10% YoY. The Past Due Loan Ratio was 2.1%, 0.13 percentage points above 2011 s, and the past due loan portfolio totaled Ps. 8.48 billion at the end of the year, growth of 22% mainly due to Fincasa Hipotecaria loan impairments and exposures to tourist developments in northwest Mexico; the Group s PDL reserve coverage was 138.3%, lower than the 143.1% recorded in the same period of the previous year. We closed 2012 with a Capitalization Ratio of 14.7% and a Liquidity Ratio of 128%. The results of the Financial Group s subsidiaries were positive. The Long Term Savings Sector comprising the Afore, Insurance and Annuities companies contributed Ps. 1.05 billion to the group s profit, 84% more than in 2011. Other Finance Companies comprising Arrendadora y Factor (Leasing & Factoring), Almacenadora (Warehousing), Ixe Automotriz (Car Leasing) and Fincasa Hipotecaria (Housing), posted a Ps. 434 million loss for the year, mainly owing to Fincasa Hipotecaria losses; the SOFOM of Arrendadora y Factor recorded a Ps. 604 million profit. Finally, the brokerage sector (Casa de Bolsa Banorte Ixe and Ixe Fondos) reported a Ps. 681 million profit for the year, 63% more than in 2011. At Banorte we continue to develop a culture of corporate responsibility. We were signatories of the CDP again, positioning GFNorte among the 10 best Latin American companies in terms of performance and disclosure. Banorte was invited to be part of Green Growth Action Alliance (G2A2), a unique public-private partnership that seeks to develop innovative financing models for green growth in order to take advantage of large private sector investments in green infrastructure projects launched at last summer s B20 Summit; we actively participate in the Davos Forum as part of the G2A2 initiative. With respect to the development of the Social and Environmental Management System (SEMS), which identifies social and environmental risks associated with Corporate and Business Banking loans amounting to more than USD 1 million, in 2012 we analyzed 237 cases, 61% of which were low risk, 3% medium risk and 36% high risk. Along with our 2011 Annual Report we published the declaration Our Commitment to the United Nations Global Compact, which was the first Communication on Progress (CoP). We stated our strong support for the United Nations World Agreement and its ten principles in the area of Human Rights, Labor, the Environment and Anti-corruption. We also committed to continue making the Agreement and its ten principles an integral part of our strategy, culture and business operations. Furthermore, we donated 45,285 toys from our annual collection, 33% more than in the previous year. The third annual Innovation Awards contest (Premio Ingenio) was also held, which seeks to encourage ongoing innovation at Banorte-Ixe by driving and recognizing the generation of new ideas that impact productivity and the quality of service. This time we received more than 1,000 ideas from our employees divided into 6 categories: Internal Processes, Products and Services, Corporate Responsibility, Integration, Specialized Areas and Implemented Ideas. Some of the winning ideas were: Pago Móvil Banorte (Banorte Mobile Payment), Panic NIP (PIN Panic), and Re-ingeniería de Estados de Cuenta (Account Statement Re-engineering), among others. Our commitment to customers and to Mexico has resulted in us once again being awarded prestigious distinctions, such as being named the Best Commercial Bank in Mexico by World Finance magazine for a fourth year in a row, as well as Best Bank in Mexico by Latin Finance, and Best Management and Investor Relations Team in Latin American 2012 by Institutional Investor for a third year in a row. Likewise, the prestigious magazine The Banker published its 10

Informe Anual 2010 Annual Report 2012 ranking of the 500 bank brands with the greatest value in the world, and in 2012 Banorte ranked 180th with 608 million dollars and an A+ rating. Banorte ranked number 6 in terms of the best places to work in Mexico according to a Great Place To Work: Companies with over 5.000 employees (number 10 in 2010), reflecting the labor culture the Institution has developed by integrating the best of each of the companies it has absorbed. For a third time and for the second year in a row, the Ministry of the Economy awarded Banorte the SME 2012 Prize, for being the most active bank in the Small and Medium-Sized Enterprise segment in Mexico through government programs. Banorte funding for SMEs through the program Programa de Garantías México Emprende (Mexican Business Loan Guarantees Program) amounted to Ps. 24 billion. The Ministry took into account Banorte s active participation in sectorial programs such as Construction Industry Support and New Entrepreneurs as well as support for tourism and employment where Banorte applied very competitive interest rates besides playing a fundamental part in the implementation of emerging programs to support the economic revival of companies impacted by natural disasters. In 2012, the Board of Directors approved cash dividends amounting to Ps. 0.73 per share payable in four installments during 2012 and 2013. This payment is equivalent to 20% of the recurring net income of 2011 in accordance with the new dividends policy approved in 2011. The Financial Group s market capitalization amounted to almost Ps. 200 billion at the close of 2012, or 97% more than in 2011. Our financial solidity was reflected in the ratification of our investment grade credit ratings from Fitch, Moody s, Standard and Poor s and HR Ratings. Finally, on behalf of all of us who work for Banorte-Ixe I would like to express my deep gratitude to our more than 22 million customers for their trust, which allows us to manage Ps. 1.5 billion in assets. Although we are larger bank, we continue to work to become an institution that is focused on meeting the individual needs of all of our customers, as reflected in the recent strategic venture with IBM to implement a new customer-focused banking model to develop and offer customized bank products and services. I would also like to thank our almost 26,000 co-workers for their effort, dedication and commitment, as well as our shareholders, Board members for their invaluable support in consolidating Banorte-Ixe as The Strong Bank of Mexico. Alejandro Valenzuela CEO of Grupo Financiero Banorte 11

Notas a los Estados Financieros Grupo Relevant Financiero Figures Banorte and Material Events 2012 Relevant Events: Afore XXI Banorte, becomes the largest Retirement Savings Fund Manager in Mexico. 15% growth in the loan portfolio. 15% growth in total deposits. Creation of 5 Regional Boards comprising 174 members. The First Plenary Session of the National Board is held. Inauguration of the Roberto González Barrera Contact Center. The Innovation Awards contest generates more than 1,000 ideas in 6 categories. 12

Informe Anual 2010 Annual Report 2012 GRUPO FINANCIERO BANORTE (1) 2010 2011 2012 Assets under management 712,414 1,295,330 1,471,422 Total assets 590,230 825,147 916,567 Value of Banorte brand name (million dollars) (2) ND 581 608 Total deposits 292,615 370,293 424,325 Total loan portfolio 270,214 357,507 409,914 Shareholders equity (without minority interest) 46,117 70,849 81,881 Net income (according to participation) 6,705 8,517 10,888 Earnings per share (pesos) 3.32 3.79 4.68 Dividends declared per share (pesos) 0.52 0.52 0.732 Paid dividends 1,029 1,157 1,240 Book value per share without minority interest (pesos) 22.8 30.5 35.2 Shares outstanding (millions) 2,018.3 2,326.4 2,326.4 Price of share (pesos) 58.86 42.32 83.45 ROE (%) 15.5 14.1 14.3 ROA (%) 1.2 1.1 1.3 Net interest margin adjusted for risk (NIM) (%) 2.9 3.3 3.4 Efficiency ratio (%) (3) 51.4 55.7 54.0 Past due loan ratio (%) 2.5 1.9 2.1 Reserve coverage (%) 123.7 143.1 138.3 Capitalization ratio of Banco Mercantil del Norte (%) 16.1 12.9 14.7 Capitalization ratio of Ixe Banco (%) - 15.3 15.5 Full-time employees and professional services 19,863 24,134 26,211 NA Not Available. Million pesos. GFNORTE Total Deposits Consumer Loans Performing Loans Money Market 89,801 Time 123,353 Car Loans 10,329 Credit Card 17,524 Demand 211,171 Mortgage 72,365 Payroll 18,183 Recovery Bank 243 Corporate 63,566 Consumer 118,401 Government 88,293 Commercial 130,929 Million pesos. In January 2012, the merger between Afore Banorte and Afore XXI was completed. As a result, Banco Mercantil del Norte determined that it has no control over Afore XXI Banorte, and does not therefore consolidate it in its financial statements, and recognizes the equity participation method given its significant influence. Financial statements as of December 31 st, 2011, reflect the effects of the deconsolidation of Afore XXI Banorte, in order to make them comparable with the 2012 financial statements. Consequently, some 2011 figures differ in this Report to those presented in the 2011 Annual Report. (1) The information for 2011 consolidates Ixe. (2) Source: The Banker / Top 500 Banking Brands. (3) Non Interest Expense / (Total Net Income + Loan Loss Provisions). 13

Notas a los Estados Financieros Grupo Financiero Banorte DELIVERY CHANNELS (1) 2010 2011 2012 Branches (2) 1,134 1,285 1,316 ATMs 5,004 6,367 6,707 Calls received by the Contact Center (millions) 29.7 36.9 41.2 Point of sale terminals (POSs) 58,336 90,649 115,213 POSs transactions (millions) 82 103 131 Third party correspondents 2,750 2,918 3,080 Number of online users (thousands) 760 1,056 1,337 Online transactions (millions) 292 460 613 Number of clients using Banca Móvil (mobile banking) transactions(thousands) 64 74 136 Banca Móvil transactions (millions) 2.0 4.7 10.0 (1) The information for 2011 consolidates Ixe. (2) Includes bank modules and excludes foreign branches. Branches MARKET SHARE Deposits GFNorte Performing Loans 14.4% 10.0% 5 10.9 % 4 10.7% 4 10.7% 4 12.7% 3 13.5% 3 11.8% 4 13.8% 3 3 2010 2011 2012 2010 2011 2012 Source: CNBV (Consolidated Financial Statements with Udis Trusts). Majority Net income 2012 2010 2011 2012 Includes credit SOFOMES in applicable institutions. GFNorte ownership in subsidiaries BANKING SECTOR (1) 8,920 92.72% BROKER DEALER 681 Casa de Bolsa Banorte Ixe 601 99.99% Ixe Fondos 80 99.99% LONG TERM SAVINGS 1,053 Afore XXI Banorte (Pension Funds) (2) 532 50.00% Seguros Banorte Generali (Insurance) 471 51.00% Pensiones Banorte Generali (Annuities) 49 51.00% OTHER FINANCE COMPANIES (434) Arrendadora y Factor Banorte (Leasing & Factoring) 604 99.99% Almacenadora Banorte (Warehousing) 43 99.99% Ixe Automotriz (Car Leasing) 33 99.99% Fincasa Hipotecaria (Housing) (1,114) 99.99% OTHER COMPANIES (921) Ixe Soluciones (922) 99.99% Ixe Servicios 1 99.99% HOLDING 1,589 100.00% TOTAL $10,888 14 Million pesos. (1) Includes Banco Mercantil del Norte, Ixe Banco and Banorte-Ixe Tarjetas. (2) Since 1Q12, Afore XXI Banorte is recognized under the equity participation method with Banco Mercantil del Norte, however, for informational and comparison purposes, the Net Income of Afore XXI Banorte is presented in the corresponding sector business.

2 Who We Are

Notas a los Estados Financieros Grupo Organizational Financiero Banorte Profile At Grupo Financiero Banorte S. A. B. de C. V. we seek to guarantee an economic, social and environmental balance in areas inherent to our daily operations and maximize the growth and profitability of our company by adhering to strict sustainability criteria and corporate responsibility. Our Mission To satisfy our customers financial needs with high-quality products and services delivered through efficient methods that guarantee integrity, security and confidence, thereby strengthening our value chain with our customers, and always providing our service with efficient and kind attention. To ensure profitability and value creation in our work in order to support our clients, shareholders and employees. To preserve the integrity and quality of all of our operations, especially in the management of the Group s deposits and equity. To be a company that offers employment in a serious and fair manner, under the right working conditions and ethical standards that promote both personal and professional development inside and outside of the workplace, treating each and every one of our employees with the highest sense of dignity and equality, offering opportunities for personal growth. To assume our responsibility as citizens, employees and an integral part of the Institution to promote growth, becoming leaders in the communities that we serve, promoting their development through the philosophy of Thinking Big. To act in a conscientious manner with regards to our environment, preserving the company s used resources and undertaking actions that generate an environmental and social awareness amongst our customers and employees. Our Values Our conduct should always be based on integrity, trust, loyalty with absolute respect and acknowledgement of the intrinsic value of the human being. GFNorte rejects any bias related to gender, age, religion, race, social origin, disability, ethnicity, nationality, sexual orientation, family responsibilities, marital status, or any other condition that may result in discrimination. Anyone who intends to defend and exercise their rights, when considering that such rights have been violated, should do so with respect for the Institution, its personnel and the work performed therein. GFNorte in numbers: A network of 1,316 branches 6,707 ATMs 115,213 POS terminals 3,080 third party correspondents 10 SME Centers 22 million customers 16

Informe Anual 2010 Annual Report 2012 GFNorte s strategic partners are the IFC (International Finance Corporation) through its subsidiary Banco Mercantil del Norte; the Italian insurance company Generali in insurance and annuities, and the Instituto Mexicano del Seguro Social (Mexican Social Security Institute) as a result of the recent merger of our respective Afores. Grupo Financiero Banorte is one of the leading financial institutions in Mexico. Following the merger of Ixe Grupo Financiero we are currently the country s third largest financial group with the largest Mexican shareholder base. We are one of the banks with the best loan portfolio quality indicators of the Mexican financial system with high capitalization and liquidity ratios. GFNorte has a presence in Mexico and in the United States of America in the south of Texas through Inter National Bank (INB), as well as in New Jersey and California through the remittance services company UniTeller and in New York through Banorte-Ixe Securities International. GFNorte has developed a wide range of banking and financial products centered on service excellence, which include: Banking Sector: universal banking services in Mexico through Banco Mercantil del Norte S. A. and Ixe Banco S. A. and through Inter National Bank in the state of Texas, USA, including remittance services through UniTeller in the United States. Brokerage Sector: broker dealer services and products. Long Term Savings Sector: afores (pension funds), insurance and annuities. Other Finance Companies: financial services that include leasing, factoring, warehousing, car leasing with Ixe Automotriz and mortgages with Fincasa Hipotecaria. Other service and asset recovery companies: through Ixe Soluciones and Ixe Servicios subsidiaries. Reinforcing its commitment to generating a positive impact on the environment; in 2012 Grupo Financiero Banorte continued alliances with the Association of Mexican Banks (ABM), Red SumaRSE in Nuevo León, National Council for the Prevention of Discrimination (CONAPRED), and the UN Global Compact, among others, to create joint work strategies in the area of social responsibility and sustainability. We also consolidated our position as Mexico s main Afore, posting significant growth in our operations following the acquisition of Afore Bancomer. In order to increase our customer service capabilities, we also opened the Roberto González Barrera Contact Center in Monterrey. (1) For details of our products and services please visit our web pages: www.banorte.com and www.ixe.com.mx 17

Notas a los Estados Financieros Grupo Corporate Financiero Banorte Governance Structure GFNorte and its subsidiaries adhere to standards that guarantee the security of financial information and compliance with regulations that govern our Sector, providing our customers, board members, shareholders and other stakeholders with a sense of security and trust. This in turn allows us to achieve our strategic objectives and conduct daily business in a more efficient manner. Article 24 of the Stock Market Law stipulates a minimum of 25% Independent Board Members. GFNorte exceeds that percentage with 57%. COMPOSITION OF GFNORTE S BOARD OF DIRECTORS: Total Proprietary Members: 14 Sex Age 85.7% 51 to 60 42.8% 14.3% 41 to 50 7.2% Older than 60 50.0% Women Men Board members with a motor disability: 7.2% 18

Informe Anual 2010 Annual Report 2012 MEMBERS OF THE BOARD OF DIRECTORS OF GFNORTE Guillermo Ortiz Martínez Héctor Ávila Flores Chairman Secretary PROPRIETARY MEMBERS Guillermo Ortiz Martínez Bertha González Moreno David Villarreal Montemayor Manuel Saba Ades Alfredo Elías Ayub Herminio Blanco Mendoza Everardo Elizondo Almaguer Patricia Armendáriz Guerra Armando Garza Sada Héctor Reyes Retana Juan Carlos Braniff Hierro Eduardo Livas Cantú Enrique Castillo Sánchez Mejorada Alejandro Valenzuela del Río Related Patrimonial Patrimonial Patrimonial Independent Independent Independent Independent Independent Independent Independent Independent Related Related ALTERNATE MEMBERS Jesús O. Garza Martínez Juan Antonio González Moreno José G. Garza Montemayor Alberto Saba Ades Isaac Becker Kabacnik Manuel Aznar Nicolin Javier Martínez Abrego Carlos Chavarría Garza Ramón A. Leal Chapa Julio Cesar Méndez Rubio Guillermo Mascareñas Milmo Alfredo Livas Cantú Javier Molinar Horcasitas José Marcos Ramírez Miguel Related Patrimonial Patrimonial Patrimonial Independent Independent Independent Independent Independent Independent Independent Independent Related Related Roberto González Barrera served as Chairman Emeritus of the Board of Directors of GFNorte until August 2012. 19

Notas a los Estados Financieros Grupo Financiero Banorte REGIONAL MEMBERS In the area of Corporate Governance, and as stated in the 2011 Annual Report, the creation of 5 Regional Boards in different areas of the country was approved: the North, Northwest, Metropolitan, West and Peninsular regions, comprising 174 Board Members from 21 Mexican states. These Boards were created to provide the Chairman of the Board of GFNorte with advice on relevant aspects and business opportunities in each of these regions. To date the following have been held: 11 Regional Board sessions attended by speakers such as Roy Campos Esquerra, Federico Reyes Heroles, Luis Carlos Ugalde Ramírez, Noé Sandoval Alcázar and Fernando Clavijo Quiroga. The First Plenary Session was held on November 6 th and 7 th, 2012. It was opened by President Enrique Peña Nieto at a gala dinner in Chapultepec Castle, and speakers included Alan Greenspan, Felipe González, Michel Camdessus, Ernesto Zedillo, Ricardo Lagos, Alan Stoga, Herminio Blanco, Carlos Elizondo Mayer-Serra, Federico Reyes Heroles and Gabriel Casillas as well as 400 guests from among the Regional Boards, members of GFNorte s Board of Directors, customers and Group directors. The purpose of the Plenary Session was to identify opportunities for development and learn about national and international economic, political and social issues in order to enrich future Regional Board sessions and present the strategic direction of Banorte in the coming years. In order to increase the base of Regional Boards, in 2013 the Central Regional Board will be created and will include leading businesspeople and eminent figures from Aguascalientes, Guanajuato, San Luis Potosí, Querétaro and Zacatecas. New members will also be included in the Metropolitan and Peninsular Boards so that Grupo Financiero Banorte will have 6 Regional Boards comprising 219 Board Members from 28 states. Dialogue and interaction with Board Members will strengthen the connections among them, their respective companies and the Group, leading to a stronger formation of the shareholder base of the institution. 20